Building Insurance – What You Need to Know About Protecting Your Biggest Asset
Building insurance, also referred to as building only insurance, provides cover for residential homes, fixtures and fittings against a wide range of events. These events include fire, storm damage, flood, lightning and explosion. Building insurance is a crucial form of cover for homeowners, so make sure to shop around to find the right policy for your needs.
When you’re shopping around for building insurance it’s important to be aware of exactly what the policy covers. Building insurance policies cover your residential home, including flats, units and townhouses. These policies also include protection for other structures and fittings on the property such as:
What type of policy should I choose?
You’ll need to look at the type of building insurance policy you wish to choose from the following:
- Defined events policy. This type of policy provides cover against fire, storm damage, flood, burglary, theft and a number of other specifically defined events.
- Accidental damage policy. This type of policy covers the events listed above as well as any other accidents that may cause damage to your home.
So, what exactly is covered?
If you're wondering what types of events are covered by building insurance, most building insurance policies cover events including:
Cover typically includes financial protection for the cost of things like demolition, the removal of debris, rebuilding costs and also temporary accommodation for your family.Back to top
Before you decide on the right policy for you, you’ll need to make sure you’re aware of the fixtures, fittings, events and costs that building insurance generally does not cover. Most policies will not provide cover for loss or damage involving the following:
What events aren't covered by building insurance?
There are also other specific events and costs for which you will not be covered, such as:
- loss or damage caused by a storm surge or the movement of the sea
- flood cover will typically not protect you against damage to things such as retaining walls, sporting surfaces and boat jetties
- loss or damage caused by erosion, subsidence, landslide or mudslide
- claims for lightning will not be paid unless you obtain written confirmation from a qualified repairer stating that lightning was the cause of the damage
- loss or damage caused by power failures or surges
- if your building does not catch on fire but receives heat, ash, soot or smoke damage, this will not be covered unless it was caused by a burning building within 10 metres of the insured building
- damage caused by cigarette burns, unless a fire spreads from the initial burn
- theft or burglary by you or someone else who lives at the insured address. The same applies to malicious acts and vandalism claims
- theft or burglary by someone who entered the address with your consent. The same applies to malicious acts and vandalism claims
- accidental breakage of glass to greenhouses or conservatories
- leaks from agricultural pipes.
When you’re looking for a building insurance, it’s important to do plenty of research and shop around for the best* building insurance. The type and level of cover offered differs between policies and providers, so read product disclosure statements closely to familiarise yourself with benefits, features, limits and exclusions. Your home is the most important asset you’ll ever own, so you need to make sure you have adequate cover in place for protection against a range of risks beyond your control.
The last thing you want to do is end up under-insured and tens of thousands of dollars out of pocket. With this in mind, remember to compare total replacement cover (these policies cover all the costs involved in rebuilding your home to what it was prior to an insured event) with sum-insured cover, which will provide cover up to a set amount.
Why compare policies?
There are many benefits to shopping around for cover, including:
- Know when you’re covered. We’ve all heard horror stories of insurance companies not paying out claims because of some obscure exclusion the policyholder was completely unaware of, so comparing policies is a great way to familiarise yourself with the cover available. Knowing exactly when cover does and doesn’t apply will ensure you don’t get any nasty surprises in the future.
- Weigh up the pros and cons. It’s impossible to know whether or not you’re getting a deal if you haven’t looked at the features of more than one policy. Taking the time to look at the benefits and limits of different policies will give you a better understanding of the available cover.
- It’s quick and easy. finder.com.au provides a wealth of useful information if you’re looking to compare building insurance policies. It’s also fast and simple to obtain quotes from multiple insurers, so you can hunt around for an attractive offer.
- Get the best price. Comparing quotes means you can choose the most affordable one, plus you can also look around for potential discounts and other ways to save on cover.
The cost of building insurance varies depending on a number of factors. Some of the influencing factors can include:
- the neighbourhood in which you live
- how old your building is and how it was constructed
- the level of cover you have chosen.
In addition, the excess amount you choose (if applicable) can also impact on the cost of your cover.
Choosing the right level of cover for your individual needs requires careful thought. To do this, go through your home and try to work out how much it would cost to replace your home in a worst-case scenario. This will give you a rough idea of how much cover you may need, but also remember to factor in other costs such as the removal of debris, temporary accommodation costs and architect’s fees.
Make sure to review your cover regularly in case you renovate or extend your home and therefore require a higher level of cover.
To save money on your policy, it’s vital that you shop around and compare quotes for multiple policies. This is quick and easy to do online. You may also be able to take advantage of a discount from your insurance provider by bundling your building insurance with contents cover.
What are your specific needs?
When choosing a policy, take the time to consider what your specific insurance cover needs are and which policies offer the protection you need. For example, you may live in a region of Australia prone to natural disasters, so a high level of cover for storm or flood damage may be required. Alternatively, you may need cover for certain fixtures and fittings that are unique to your home, such as electric motor burnout in your ducted air conditioning or cover for specific outbuildings.Back to top
It’s a sad fact of life that many Australians are under-insured and don’t have enough cover to meet their needs, with some estimates suggesting that as many as 80% of Australian homes are under-insured. Some people think they can afford to take the risk of not having enough cover in place, while many more are simply unaware of exactly how much financial protection they actually need.
However, although you may worry that cover is expensive, having the right level of protection in place can save you tens or even hundreds of thousands of dollars in the long run. The building insurance policy you take out should cover the total replacement cost of your property, including other expenses which may arise such as temporary accommodation.
If you’re under-insured, you’ll have to pay the gap between what your policy covers and the replacement cost for your building, which in many cases could be a substantial amount of money. It’s your responsibility as a homeowner to check that your building is insured for its full ‘new for old’ replacement value.Back to top
Many providers offer policies that allow you to purchase additional cover against further risks for an extra amount. Some of the common additional cover options available include:
- the burnout of electric motors, which is referred to as fusion
- cover for your household pets
- domestic workers’ compensation.
Some policies include flood cover regardless of whether or not you live in a flood zone, which can mean you’re paying much more for your premiums than you need to. However, if you live in a flood-prone area, taking out optional flood cover could have many benefits.
How can I lessen my risks?
If you live in an area prone to flooding or storms, there are several steps you can take to minimise the potential for loss or damage.
If you live in a storm-prone area:
- clean up outside to prevent loose items turning into dangerous projectiles when a storm hits
- get rid of any overhanging branches and trim back trees near your home
- prepare a storm kit with first-aid supplies, torches, batteries, a battery-powered radio and more
- keep your phone charged
- use common sense and stay inside when a storm hits, follow directions from emergency personnel and stay well away from fallen power lines.
If you live in a flood-prone area:
- clean up your yard and move whatever you can to high ground
- keep your phone charged
- prepare a flood kit with first-aid supplies, torches and clean water
- turn off your home’s power and unplug your home’s electrical goods
- be ready to evacuate if ordered to do so.
Commercial building insurance
As the name suggests, commercial building insurance is the same as building insurance but for commercial rather than residential properties. A commercial property insurance policy provides cover for your business’ contents, fixtures and fittings against a variety of events that can result in loss or damage. Cover is included for fire and defined events, theft, glass, machinery breakdown, legal liability and more.
Strata building insurance
This type of insurance is designed to provide cover for strata title properties and to be taken out by a body corporate or owners corporation. It includes cover against risks like fire, flood, storm and earthquake, as well as loss of rent if property damage forces tenants to leave. Theft, malicious damage, water and oil leaks, broken glass and legal liability are also included in cover.Back to top
- Shop around. Compare policies and prices for a better deal.
- No-claim bonus. Many insurers will reduce the price of cover if you don’t make a claim under your policy for a certain period of time.
- Choose a higher excess. This will result in lower premiums.
- Choose a lower level of cover. Consider whether you need the highest level of cover offered, plus ensure that you are not paying for options you will never use.
- Multi-policy discounts. Bundle your cover with another policy from the same insurer to save money.
- Age discounts. Some providers offer discounts for policyholders aged over 50.
Ready to compare policies?
Building insurance offers essential financial protection for the most important asset you’ll ever own, so shop around and compare policies to ensure you end up with the right level of cover in place. Compare policies online today and find the right policy for you.
* The offers compared on this page are chosen from a range of products finder.com.au has access to track details from and is not representative of all the products available in the market. Products are displayed in no particular order or ranking. The use of terms 'Best' and 'Top' are not product ratings and are subject to our disclaimer. You should consider seeking independent financial advice and consider your personal financial circumstances when comparing products.